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CFTC Takes Action Against California Bitcoin Ponzi Scheme

2 mins In Brief

  • The CFTC has brought an enforcement action seeking just for over 170 investors in a Ponzi scheme.
  • The defendants allegedly enticed investors with promises of high profits, commissions, and referral rewards.
  • But the CFTC says they never acquired digital assets as promised and instead misappropriated the funds.
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 CFTC Takes Action Against California Bitcoin Ponzi Scheme

The Commodity Futures Trading Commission (CFTC) has accused five men of operating a Ponzi scheme. According to the complaint, they used the promise of digital assets they never actually acquired to lure investors with promises of stellar profits. The defendants targeted their own Spanish-speaking community in what the CTFC is calling “affinity-based fraud.” In the CFTC’s view, the victims may have been highly vulnerable to pressures from people they were led to believe had much in common with them. Affinity fraud and other scams are on the rise.

The Commodity Futures Trading Commission (CFTC) has taken action against five men accused of defrauding more than 170 investors. The victims were primarily Spanish-speaking and lost significant sums of money as a result of the scam.

The CFTC’s Allegations

In a complaint filed in the US District Court for the Central District of California, the CFTC describes a digital asset commodity trading business, luring victims with promises of profits, commissions, and referral rewards. The company, “Icomtech,” reputedly used marketing materials offering luxury holidays and cars, iPhones, and Rolexes to convince others to sign people up.  

The respondents allegedly held out promises of a lucrative opportunity. Offering those who took part a chance to earn a 20% commission for each package sold and an additional 3% for packages sold by their direct affiliates. 

However, the organizers never actually acquired any digital assets as agreed. Instead, the CFTC alleges that the five misappropriated the funds entrusted to them, operating an “old-school Ponzi scheme.”

Affinity-Based Fraud

The commission’s statement highlights how the fraud targeted a Spanish-speaking community in California. In the statement, CFTC Commissioner Kristin N. Johnson describes how crimes like this one are “distinctly problematic”:

“Affinity-based fraud schemes all-too-often seek to exploit the trust generated within a community. Perpetrators target the identified communities because they are familiar with the fears and challenges that may deter investors from reporting or effectively communicating the details of the fraud to law enforcement or regulatory authorities.” 

Most tracked crypto crimes happen on-chain, either via hacks or fraud. However, the defendants here appear to have only used digital assets as an enticement for profits.

The problem of crypto-related crime is chronic and severe. Chainalysis, which tracks crime, recorded a record year for criminals in 2022. Total cryptocurrency value received by illicit addresses rose for the second consecutive year, despite the market downturn.